Written for landlords, property managers and short-term rental hosts across the US, with state detail for California, Texas, New York and Florida.
The short version
- Test whether each maintenance worker is an employee.The IRS uses a common-law test. Under California's stricter ABC test, a full-time 1099 handyman working only for you is usually an employee.
- License or supervise every leasing agent.Showing units and negotiating leases for others often needs a real estate license, or work under the broker. Pay commission on signed, funded leases.
- Put an on-site manager's rent credit in writing.A free or cheaper apartment counts toward pay only up to the lodging's reasonable cost. California also needs a voluntary written agreement.
As a management company grows it adds three kinds of people: someone to fix things, someone to show and lease units, and sometimes someone living on site. Each role has a trap that general hiring advice misses.
Maintenance: employee or contractor
For federal taxes the IRS uses the common-law test: behavioral control, financial control and the relationship. Misclassification brings back payroll taxes, penalties and wage claims.
California's stricter test
California applies the ABC test, so a full-time "1099 handyman" who works only for your company is usually an employee there. As of Oct 2026.
California Labor Code 2775 (AB5)
Overtime
Federal law generally requires overtime after 40 hours in a workweek for non-exempt staff. California also generally requires daily overtime after 8 hours in a workday, double time after 12 hours, and special seventh-consecutive-day rates, subject to exceptions and valid alternative schedules. As of Oct 2026.
29 USC 207(a); California Labor Code 510(a)
Leasing agents
Showing units and negotiating leases for others often needs a real estate license, or the agent must work under the broker. Pay commission on signed, funded leases.
On-site managers
An apartment as part of pay
Federally, a free or reduced-rent apartment can count toward an on-site manager's wages only up to the reasonable cost of the lodging (29 CFR 531.3). In California it also needs a voluntary written agreement, and the credit is capped by the state's lodging-credit limits, which are strict. Wherever you are, put the apartment's value and how it counts toward pay in writing. As of Oct 2026.
29 CFR 531.3
When to hire
The growth path runs from a self-managing owner with a few dozen doors to a management company with a broker of record, a leasing agent and a maintenance coordinator. Decide each hire on doors per property manager and fee income per door, not on rent collected, and track both from your own records.
California's test is stricter than the federal one, and misclassification brings back payroll taxes, penalties and wage claims.
Asked in Greymill
The handyman: California uses the ABC test, stricter than the federal one (As of Oct 2026). A full-time 1099 handyman who works only for you is usually an employee there, invoices or not.
Getting it wrong brings back payroll taxes, penalties and wage claims.
The hours: California generally requires overtime after 8 hours in a workday, not just after 40 in a week, with some exceptions (As of Oct 2026).
A 10-hour day: usually 2 hours of overtime, if the handyman is an employee
So track hours by the day.
The manager's unit: it counts toward pay only up to the lodging's reasonable cost. California also needs a voluntary written agreement, and its lodging-credit limits are strict (As of Oct 2026).
Want my list of what to change first? MARCUS can then take you through the payroll taxes.
Ask it about your own business
Paste this into Greymill with your own figures, and Staff & HR works it through for your business.
I run a property management business in [state], in the US. We have [number] maintenance workers paid [as employees or on 1099s], [number] leasing agents paid [how], and an on-site manager who gets [apartment and pay]. Check each role's classification, overtime, licensing and pay setup for [state], and list what to change first.
More for property management and rentals in the US
- Raising rent to market without breaking a rent capIn capped states and cities the legal maximum, not the market, sets this year's increase, so check the cap and the notice period before you price.Read the lesson
- Will this building still cash flow after the loan, taxes and reserves?Lenders and buyers judge a rental on NOI and DSCR, so work them out the way they do and run a 13-week cash view alongside.Read the lesson
- Why can't I use my rental loss, and am I depreciating it right?Rental tax turns on depreciation you must take, losses you may not be able to use yet, and deadlines on 1099s and exchanges.Read the lesson
- Do I need a broker license to manage rentals for other owners?Managing rentals for others for a fee is brokerage in most states, and a trust account and safety duties come with it.Read the lesson
- Lease clauses and deposit mistakes that cost owners doubleSome common lease clauses are void, and getting a security deposit wrong at move-out can cost two or three times the amount.Read the lesson
- Winning owners and filling units without a fair housing problemOwners buy lawful screening, deposit compliance and clean trust accounting, and every listing and screening step has to follow fair housing law.Read the lesson
- A tenant has stopped paying: the notice, the count and the court in your stateNonpayment cases fail on the notice: the wrong number of days, the wrong delivery method, or a federal notice you did not know applied.Read the lesson
Open the interactive lesson · Every property management and rentals lesson · What Greymill knows about the trade
Sources
The primary sources behind this lesson, checked Oct 2026.
- 2775(b)(1) (People: contractors, wages, leasing agents and I-9)
- FLSA 29 USC section 207(a); California Labor Code section 510(a) (People: contractors, wages, leasing agents and I-9)
- 531.3 (People: contractors, wages, leasing agents and I-9)
- employer coverage (People: contractors, wages, leasing agents and I-9)
- 274a.2(b)(1)(i)(A), (ii) (People: contractors, wages, leasing agents and I-9)
- 4980H(a), (c)(2) (People: contractors, wages, leasing agents and I-9)
- 453(i) (Size, growth and exit)
- 26 CFR 1.1031(k)-1(b)(2) and (g)(4) (Size, growth and exit)
- alert (Size, growth and exit)
- 1.453-12(a) (Size, growth and exit)